US equities tumbled again, unable to shake off US job worries and dragging the USD and US bond yields lower. US ADP Employment fell to 99k in August, well below the 145k expected, while July was revised to 111k from 122k. Despite some relief over initial jobless claims declining to 227k for the week ending August 31 from 232k the previous week, ISM service employment dropped to 50.2 in August from 51.1 in July. The futures market held on to their bets for a larger 50 bps cut at the FOMC meeting on September 18 vs. the consensus for a normal 25 bps cut on the Fed’s guidance to prevent a further cooling in the US labour market. Next week’s CPI inflation is also expected to slow to 2.6% YoY in August from 2.9% in July, even as core inflation stays unchanged at 3.2%, both still above the 2% target. The ISM Services PMI survey supported a soft landing in the US economy. Although the headline activity index declined to 50.2 in August from 51.1 in July, it held above the breakeven 50 level for a second month on new orders rising to 53.0 from 52.4.
Today’s US nonfarm payrolls are expected to hold below 200k despite expectations for an increase to 165k in August from 114k in July. Likewise, the unemployment rate should hold above 4% despite projections for a moderation to 4.2% from 4.3%. New York Fed President John Williams and Fed Governor Christopher Waller speak after the US jobs databefore the Fed enters its pre-FOMC blackout next week. Williams was one of the two Fed Presidents who voted to reduce the discount lending rate in July, according to last week’s Fed discount minutes.
Next week’s focus will be the US Presidential Debate (Sept 11 at 9 am Singapore time). Kamala Harris has supercharged the Democratic campaign and polled ahead of Republican candidate Donald Trump. However, bookmakers have not ruled out a Trump victory. Harris still needs to win over the swing states to secure her legacy as the first female US president. The second debate will be important for voters to assess the divergent approaches of both candidates to their top concerns – the economy and inflation. As far as markets are concerned, the US economy is no longer exceptional, and the next US presidential term will be about the Fed cutting rates and not hikes.
Quote of the day
”Travel teaches us that we have the ability to adapt.”
Ferdinand Magellan
September 6 in history
Ferdinand Magellan’s ship “Victoria” completed the first circumnavigation of the Earth in 1522.
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